Friday Roundup: Florida supermajority vote, fees considered for Seattle waterfront improvements, February hiring surge, opportunities for suburbs

There are always a few items we’ve read during the week that deserve more attention but don’t make it into our regular posts. So we bundle them for the Friday roundup.

Here’s this week’s bundle:

Associated Press: Florida Legislature: Require 2/3 vote for future tax hikes

Florida voters will decide this fall whether to make it harder for state legislators to raise taxes or fees in the future.

The Florida Legislature on Monday placed a proposed constitutional amendment on the November ballot that would require a two-thirds vote by lawmakers to approve any tax increases.

Seattle Times: For waterfront revamp, Seattle weighs fees for downtown property owners

With the Alaskan Way Viaduct scheduled for demolition in less than a year, the Seattle City Council is considering whether and how much to make certain property owners pay to help build a park-studded promenade along the downtown waterfront.

The council could vote as soon as May on a resolution letting the public know about its intent to create a local-improvement district (LID) and as soon as October on an ordinance that would make the LID real. Authorized by state law, LIDs allow cities to raise money for infrastructure projects by charging nearby property owners who stand to benefit through property-value increases.

Wall Street Journal: Trump Administration Joins States in Push to Expand Online Sales-Tax Collections

The Trump administration on Monday urged the Supreme Court to expand states’ authority to collect sales tax on internet transactions, joining a chorus of state officials seeking to overrule a 1992 precedent exempting many online retailers from having to add taxes to a consumer’s final price.

In 1992, the justices “did not and could not anticipate the development of modern e-commerce,” Solicitor General Noel Francisco wrote in a friend-of the-court brief. “In light of internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers.”

Associated Press: Hiring surge added 313k jobs in February, most in 1 1/2 years

U.S. employers went on a hiring binge in February, adding 313,000 jobs, the most in any month since July 2016, and drawing hundreds of thousands of people into the job market.

At the same time, average wages rose 2.6 percent over the past 12 months, a slowdown from January’s accelerated pace, which had spooked investors because it raised fears of high inflation. Friday’s jobs report from the government revised down January’s year-over-year wage gain by one-tenth of a point to 2.8 percent.

GeekWire: As tech cities battle affordability issues, suburbs look to pick up slack

Seattle’s affordability problems are well-documented: It’s the hottest housing market in the country, with an exploding population that outpaces the number of new houses and apartments being built.

…With cities like Seattle filling up and running out of space, suburban leaders are exploring ways to pick up some slack. At the Economic Forecast Conference, put on by the Economic Development Council of Seattle & King County, the mayors of nearby cities Everett, Kirkland and Auburn discussed the balance they are trying to achieve between a regional approach that welcomes the growth coming to the Seattle area, while also protecting the residents and businesses already there.

Wrapping up the budget: Legislature poised to adopt 2018 supplemental budget today, Day 60 of the 60-day regular session.

Legislative leaders have produced a compromise budget agreement. There’s been little time for outside analysis and less for  public comment. The Washington Research Council writes in a blog post (we recommend reading the short piece),

Yesterday evening the conference agreement on the 2018 supplemental operating budget was announced. It would increase near general fund–state plus opportunity pathways (NGFS+) appropriations by $941.0 million over enacted 2017–19 appropriations. That’s $176.5 million less than the Senate-passed budget and $560.6 million more than the House-passed budget. (For more on the budgets that passed each chamber, see our policy brief.)

The conference agreement would fully fund the increase in school staff salaries in SY 2018–19, as ordered by the state Supreme Court. It would not change the apportionment schedule to save $609 million in the current biennium, as the House-passed budget would have done. It would create the dedicated McCleary penalty account to house the fines that have been accruing in the case ($105.2 million), and it would appropriate the full amount for basic education items.

The WRC notes the agreement contains no capital gains tax.  

The Seattle Times reports on the budget and the politics, 

Washington Democrats on Wednesday released a state budget agreement that would add court-ordered K-12-school funding and also give a one-time property-tax cut…

The nearly $400 million tax cut would take effect for the 2019 calendar year. It is intended to ease the burden of the state property-tax hike lawmakers approved last year to fund Washington’s schools…

That part of the budget deal comes in Senate Bill 6614, which gets the money by ultimately diverting hundreds of millions of dollars from going into the state’s constitutionally protected rainy-day fund.

Senate lawmakers Wednesday evening approved the bill on a party-line vote, but not before Republicans balked.

We discussed the controversial proposal here; the WRC explains the nearly $1 billion transfer from the general fund to a dedicated education account thereby avoiding a supermajority vote to tap the rainy day fund. 

The News Tribune also reports on the budget deal.

The proposal has drawn opposition from minority Republicans who wanted to give a bigger cut and reduce the taxes in 2018 — when property taxes for many spike to pay for court-ordered public school reforms approved in 2017.

The Democratic plan also has drawn fury from the GOP lawmakers who accuse Democrats of skirting rules on tapping the state’s constitutionally protected reserve account for economic stability and emergencies, known in Olympia as the rainy day fund…

“It’s flat out the worst budget trick in the history of budget tricks,” state Sen. John Braun, a Centralia Republican, said in a Tuesday interview with The News Tribune and The Olympian.

The Democrats’ lead budget writer disagrees.

Rolfes told the two news outlets on Tuesday the plan is necessary because the GOP “indicated” they didn’t support an earlier proposal to pay for the property tax cuts with money from the rainy day fund.

“We can give that money back directly to the people before it goes to the rainy day fund,” Rolfes said.

The strategy “allows it to be a simple majority vote so we don’t have to fight about it,” she said.

It looks like the budget has the votes required to allow on-time adjournment later today. The Seattle Times editorial board would like lawmakers to avoid these end-of-session rush jobs.

This may be the way Washington’s government has often worked, but it shouldn’t be. Members of the public, along with businesses and state agencies, need time to digest complicated legislation and offer substantive feedback. This process of holding public hearings and debating bills at length helps avoid oversights that can lead to problems down the road…

If lawmakers have learned anything from this year’s public-records debacle and last year’s rushed budget, it should be that listening to the public is a key part of their job. They should take that lesson to heart and stop cutting citizens out of the process by leaving some of their most important work until the last minute.

Maybe next year.

This is not surprising: Philadelphia Mayor’s budget cuts expectations for soda tax revenues

Philadelphia’s  soda tax has had a rocky record of underperformance and volatility. We first wrote about the tax shortly after it was adopted in 2016. We asked the Philly folly was going to launch a trend. Well, as we know, Seattle eventually followed suit

Charles Hughes at E21 writes that the experiment in Philadelphia is going about as well as most critics expected

In unsurprising news, Philadelphia Mayor Jim Kenney’s budget proposal reduced the projected revenues from the city’s beverage tax by about 15 percent. For a multitude of reasons, revenues have not met expectations.

Soda tax revenue was already earmarked as the funding source for new pre-K seats, community schools, and other programs. As a result of missed revenue targets, these planned initiatives are adversely affected and have been scaled back. The unpopular soda tax was initially sold in part as a way to finance these programs that generally enjoy widespread support from voters. So far, the record shows these taxes cannot reliably be counted on to generate the projected amount of revenue.

Philadelphia became the first city to pass a sweetened beverage tax in 2016, and the 1.5 cent-per-ounce tax on the supply of sweetened beverages to retail dealers came into effect in January 2017. Other jurisdictions such as San Francisco, Seattle, and Cook County (Illinois) quickly followed suit. These efforts have also been beset by problems and the Cook County tax has already been repealed.

An initiative has been introduced to ban local soda taxes in Washington, we noted last week. Seattle’s existing tax, reportedly, would not be affected. Hughes reports on a novel challenge to the Philadelphia tax.

The Pennsylvania Supreme Court indicated in January that it will consider the legality of the tax. The plaintiffs, among them a collection of retailers and the American Beverage Association, argue that although the tax nominally is levied on distributors, it is passed on to consumers. Because consumers already pay sales tax, this group claims this amounts to double taxation, which is prohibited by the state’s Sterling Act. If the case is decided for the plaintiffs, it could portend a wave of court challenges to soda taxes. Even if the case is decided in favor of Philadelphia, the uncertainty has already slowed the rollout of the promised programs to be funded by the beverage tax.  

Worth watching. And it makes you wonder why any city would tie the funding of important and popular programs to the volatile revenue stream uncertainly flowing from an unpopular tax.

In closing days of session, Senate considers new proposal to lower state property tax and reduce reserves.

The Washington Research Council has a good initial analysis of a striking amendment introduced last night. WRC analyst Emily Makings writes,

Last night, Sen. Rolfes introduced a striking amendment to SSB 6614 that would reduce the state property tax for CY 2019 and ultimately reduce revenues deposited in the budget stabilization account (BSA, or rainy day fund).

…The striker would not transfer funds out of the BSA. However, it specifies that $935 million of the property taxes collected would be deposited in the education legacy trust account (ELTA) in FY 2019 “for the support of common schools.” (The education legacy trust account is part of the near general fund–state plus opportunity pathways (NGSF+) rolled-up account. The state discusses the budget in terms of the NGFS+.)

…by redirecting $935 million from the GFS to the ELTA, the striker would reduce the amount that is constitutionally required to be deposited in the BSA. The impact to the BSA would be less than $935 million, but I haven’t seen an official estimate of the fiscal impact. According to Sen. Braun, it would mean that BSA funds would be reduced by “more than $700 million.”

If that’s correct, it’s not clear to me at this point why the $935 million figure was chosen. The bills assumed in the budgets would withdraw amounts from the BSA to cover the costs of property tax rate reductions. But this striker would seemingly redirect from the BSA more than necessary to cover the rate reduction. The CY 2019 rate reduction in HB 2993 is larger, yet it would reduce revenues by only $438.8 million in CY 2019.

Sen. Braun’s post, to which Makings refers, is a strongly-worded objection to the striker.

Although state government expects to take in $2.3 billion in additional tax revenue, the Senate Democrat majority is still looking to raid budget reserves using what Sen. John Braun called a felony budget gimmick. Braun said the Democrats’ proposed amendment to Senate Bill 6614 violates the spirit and intent of voter-approved protections that place extraordinary revenue growth into the budget stabilization account, more widely known as the rainy day fund.

“After the Great Recession exposed Olympia’s failure to capture and protect unanticipated revenue, the voters approved critically important safeguards against overspending in good economic times,” said Braun, R-Centralia, who serves as ranking minority member on the Senate Ways and Means Committee. “This proposal from the Senate majority creates a constitutional crisis by rejecting the overwhelming demand from 67 percent of voters for fiscal responsibility and accountability. It sets an incredibly dangerous precedent for future state budget decisions.”

The Democrats’ proposed amendment to the bill would funnel $935 million in property tax revenues to the education legacy trust account. Redirecting the funds lowers general fund revenues, which Braun says circumvents the spirit of the law by reducing the amount of money going into the rainy day fund by more than $700 million.

The WRC cites a report that an agreement has been reached with the other chamber.

According to Walker Orenstein of the News Tribune, the House “is on board” with the striker. Orenstein also reports: “Rolfes said the move is just normal budgeting and necessary to cut property taxes because the GOP wouldn’t support the previous plan that tapped the rainy day fund.” The Senate didn’t vote on this last night but could today.

In the closing days of the session, things move quickly, though not always smoothly. The debate may be interesting.

Getting short on time for manufacturing tax relief in 2018 legislative session: More on why it matters

The Association of Washington Business continues to promote manufacturing tax relief. In yesterday’s Fast Facts newsletter, AWB wrote,

House and Senate budget negotiators continue to craft a supplemental operating budget agreement. One issue is whether to provide tax relief for manufacturing and whether that relief should be limited to “rural” areas (see House Bill 2992). Read last week’s blog post at Olympia Business Watch for more on how AWB is advocating for all manufacturers to see B&O tax relief.

AWB is calling on lawmakers to act this session to show support for a sector that’s falling behind other parts of the economy. Time is running out for legislators to help ensure that Washington is a competitive place for manufacturers, whether in the industrial working waterfront of Seattle or across the state in struggling rural communities that are equally dependent on the quality, high-paying jobs that manufacturing employers provide.

We have written often of the importance of the tax relief vetoed by the governor last year. And we included links to these effective short videos produced by AWB. 

Lori Matson, president and CEO of the Tri-City Regional Chamber of Commerce makes the case for statewide tax relief in the Tri-City Herald.

The good news is lawmakers are currently considering bills that would reinstate the uniform B&O tax relief, a move that would jump-start job creation in every part of the state.

House Bill 2992, sponsored by Reps. Mike Chapman, D-Port Angeles, Jacquelin Maycumber, R-Republic and Dick Muri, R-Steilacoom, is a good start to the conversation on how to reverse the trend of manufacturing job losses. Unfortunately, the bill narrows the tax relief to apply to manufacturing operations in just 30 of the state’s 39 counties.

It excludes nine counties, including Benton and Spokane counties in Eastern Washington. Here in the Tri-Cities, we know we’re one region, so it makes sense to include all manufacturers, no matter their location.

A small change to the bill to make the reduced B&O tax rate apply statewide would send a positive signal of tax certainty to manufacturers across Washington as well as demonstrate an understanding that the entire sector needs room for more investment in their operations, regardless of where the business happens to be based.

The bill, with the small change, would help roughly 12,500 small- and medium-sized manufacturers in Washington invest in their employees and create jobs. That rising tide would lift all boats.

Right. And like AWB, Matson concludes, 

With less than one week left in the 2018 legislative session time is running short to pass this tax relief. However, it’s not too late to reach out to legislators in your district and explain what tax relief would mean for your business, your employees and your communities.

The clock is ticking.

Washington becomes first state in nation to enact net neutrality law

With yesterday’s bill signing, Washington became the first state in the nation to enact a net neutrality law. The Spokesman-Review reports,

Washington became the first state in the nation to require internet service be “net neutral” as Gov. Jay Inslee signed a bipartisan bill Monday afternoon.

The law, which will take effect in June, does not allow internet service providers to slow down service to some customers, block lawful sites or organizations or degrade lawful internet traffic. Internet providers will also be required to disclose information about their management practices, performance and commercial terms.

The Associated Press writes,

Washington state was among more than 20 states and the District of Columbia that sued in January to try and block the FCC’s action. There are also efforts by Democrats to undo the move in Congress.

Governors in five states — Hawaii, New Jersey, New York, Montana and Vermont — have signed executive orders related to net-neutrality issues, according to the National Conference of State Legislatures.

The impact of the legislation is not altogether clear. As the AP writes,

Big telecom companies have said net-neutrality rules could undermine investment in broadband and introduce uncertainty about what are acceptable business practices. Net-neutrality advocates say the FCC decision harms innovation and make it harder for the government to crack down on internet providers who act against consumer interests…

Messages left Monday with the Broadband Communications Association of Washington, which opposed the bill, were not immediately returned.

But executive director Ron Main said last month that its member companies “have made legally enforceable public pledges that we do not take any action to block legal content; that we do not engage in throttling; that we do not discriminate; and that we will insure that our practices are transparent to all of our customers.”

As Wired magazine reports, the measure had significant bipartisan support and goes beyond the steps so far taken by other states.

The Washington bill enjoyed bipartisan support in the state legislature, with dozens of Republican lawmakers voting in favor of the new rules last month. The bill passed with a vote of 93 to 5 in the state House, and 35 to 14 in the Senate.

“This is not a partisan issue,” Norma Smith, a Republican who co-sponsored the bill in the House, said in a statementlast month. “This is about preserving a fair and free internet so all Washingtonians can participate equally in the 21st century economy.”

The governors of Montana, New York, New Jersey, Hawaii, and Vermont have signed executive orders banning state agencies from doing business with broadband providers that don’t promise to uphold the principles of net neutrality. But Washington is the first state to pass rules that ban network discrimination.

Geek Wire interviewed  the governor. He told them,

Our attorney general will be alert to any violations of that, and we’re hopeful that it will be respected. We believe that the companies that respect this will certainly be appreciated by their consumers and if not, they’re going to end up on the short end of some legal action. We feel confident in our ability to move forward… This is, at heart, a consumer protection law and we are providing a mechanism to protect consumers from illicit behavior in the marketplace, and that’s where it’s at. At its very core function, that’s what this bill does. 

Northwest Public Broadcasting notes that some businesses are concerned about inconsistent regulations across the country.

The Oregon Legislature last week passed a more narrowly drafted measure to require companies doing business with state and local government to adhere to net neutrality. 
Telecom companies say a patchwork of state laws would be untenable for interstate internet traffic.

Although Washington got there first, this will likely not be the last we hear about the issue.

Carbon “fee” initiative filed for November ballot. Revenues to be directed to developing a “low-carbon economy.”

Within hours of the announcement that the Legislature was not going to pass a carbon tax this session, a group filed an initiative (as yet unnumbered, it was filed March 2 at 3:32 p.m.) that will put a price on carbon. The Seattle Times reports,

An initiative filed Friday would create an escalating Washington carbon “fee” on fossil fuels, and invest the revenue in clean energy, clean water, forests and other projects that seek to slow or help cope with climate change.

The initiative was filed with the Secretary of State one day after a carbon-tax bill died in the Legislature. It is backed by the Alliance for Jobs and Clean Energy, a coalition of labor, environmental and tribal groups that are hoping their measure can make it onto the November election ballot.

“This is the broadest coalition I have been involved with in my over 30 years of work,” said Jeff Johnson, president of the Washington State Labor Council. “And I will be going all around the state over the next two months talking to unions about this.”

Johnson tells the Times that establishing a “fee” rather than a tax allows the revenues to be tied to programs that will help “create a low-carbon economy.” Frankly, we’re not sure how that would work; undoubtedly, there will be a lot more analysis in the coming weeks. The Times reports,

The fee would start at $15 a metric ton of carbon, which would add an estimated 14 cents to the cost of a gallon of gasoline, and rise annually by $2 plus the rate of inflation.

Initiative 732, defeated by the voters in 2016, also would have initiated a $15 per metric ton tax in 2017, rising to $25  in 2018. The Washington Research Council analysis of the initiative stated that at $25 per metric ton I-732 would have raised the price of gasoline by 22.2 cents per gallon. That measure was designed to be revenue neutral. In a January 2015 Seattle Times op-ed, proponents wrote,

Our carbon tax would make fossil fuels more expensive. The carbon tax would phase in to a rate of $25 per ton of CO2 (a bit less than the $30 rate in B.C.) and then increase slowly over time to maintain revenue neutrality and incentivize additional emissions reductions. For context, $25 per ton of CO2 is roughly equal to 25 cents per gallon of gasoline at the pump or 2.5 cents per kilowatt hour of coal-fired power.

The resulting revenue would be “recycled” into offsetting tax reductions. About 75 percent would go toward a 1 percent reduction in the state sales tax that would benefit households and businesses across the state (a household making $45,000 a year is likely to save almost $200 annually). Our proposal also would fund the Working Families Tax Rebate for low-income households and effectively eliminate the B&O tax for manufacturing.

The group backing the carbon fee includes many who opposed the 2016 initiative, largely because of the revenue-neutral approach taken by I-732.

It is no surprise, then, that the alliance’s core objection to I-732 is that it is revenue-neutral — it surrenders all that precious revenue, which is so hard to come by in Washington. That, more than anything else, explains why alliance groups are not supporting it.

Their calculus is simple: Properly dealing with climate change requires lots of investment, and if a price on carbon doesn’t fund that investment, what will?

The proposed carbon fee is their answer. According to the Times, proponents of the new initiative recognize that the fee may threaten some Washington businesses and consumers.

The 57-page initiative carves out exemptions for some trade-sensitive industries, such as aluminum producers who face foreign competition…

Utilities also could gain credits for certain types of investments.

But creating a fee does not allow rebates or exemptions for low-income residents, Johnson said. Instead, low income residents could benefit from new investments in their communities for conservation, solar, clean-energy, job training and other efforts, he said.

Backers have until July 6 to get the 259,622 signatures required to make the November ballot. 

U.S. News ranks Washington No. 6 in 2018 Best States Report: Top marks for health care, education, economy, infrastructure

Washington boasts an enviable No. 6 ranking in the latest “best states” report from U.S. News.  Iowa claims No. 1, followed by Minnesota, Utah, North Dakota and New Hampshire.

Washington’s overall ranking can be attributed to its high marks in health care (#2),  economy (#3), infrastructure (#4), and education (#6). The state received lower marks on quality of life (#21), opportunity (#27), fiscal stability (#27), and crime and corrections (#39). U.S. News writes,

In addition to its scenic treasures, Washington is known as the birthplace of Starbucks coffee, The Boeing Co., and Microsoft Corp. Because of its coastal location, Washington is a key exporter for the U.S., particularly for transportation equipment. Additionally, Washington is crucial to the nation’s food and agriculture industry, generating 70 percent of the country’s apples, and also leading in milk, potato and cattle production.

As the world headquarters for Boeing Commercial Airplanes, the aerospace industry is a major economic driver for the state. The military and defense sector employs the second largest number of people in Washington, with more than 127,000 active duty, reserve, guard and civilian personnel. Others successful industries include maritime, technology and clean energy.

The state’s median household income, $67,106 in 2016, was above the national average of $57,617. The unemployment rate was slightly above the national average.

Business Insider focuses a short article on the U.S. News measure of opportunity.

Opportunity is one of the eight factors that went into figuring out US News rankings for best states. In fact, survey participants considered opportunity the fourth most important measurement in the methodology of the rankings.

To determine the ranking, each state was measured on numerous metrics that matched three criteria: economic opportunity, equality, and affordability. The latter two were both given a 40% weight, while affordability was weighed at 20%.

Income inequality, median household income, poverty rates, and food insecurity rates all went in to finding the level of economic opportunity for each state. Equality was measured through education, employment, and income gaps based on gender, race, and disability. Cost of living and housing affordability were considered in the affordability ranking.

On the opportunity dimension, Washington ranked No. 16 in economic opportunity, No. 32 in Equality, and No. 44 in affordability.  

All the usual caveats apply to the “best states” rankings – there’s an inevitable subjectivity to weighting and selection of metrics – but the report is well-done and useful. If you have the time and inclination, the data explorer allows you to get behind the ranking and understand the measurements.

 Pacific Northwest neighbor Idaho (overall ranking No. 12) gets a special callout in the report that will interest Washingtonians.

Idaho leads the nation in entrepreneurship, with a rate of business startup that outpaces anywhere else. George Seybold, founder of Talloo, a company created to help entrepreneurs in the region connect, brainstorm and share ideas, says people fed up with the cost of places like Silicon Valley and Seattle are finding Idaho more hospitable and are bringing ideas and startup capital with them.